Short Selling

The U.S. Supreme Court has issued a unanimous ruling allowing investors to sue Bank of America Corp’s Merrill Lynch (BAC) and other brokerage firms in New Jersey state court even though the lawsuit cites federal laws. The plaintiffs, who are Spectrum Group International Inc. investors, claim that they sustained investment losses because the brokers engaged…

Andrew L. Evans, a trader living in Canada, has consented to pay over $1 million to resolve charges that he shorted U.S. stocks in companies planning follow-on offerings and then illegally purchased shares in the offerings to generate substantial profits at little to no risk. The Securities and Exchange Commission said that through his firm…

The SEC said that Merrill Lynch (MER) would pay $11 million to resolve allegations of short-selling-related noncompliance. The regulator said that the wirehouse executed short sales in certain securities when the supply for this type of transaction was restricted. Customers frequently ask brokerage firms to “locate” stock that can be used for short selling. The…

The Financial Industry Regulatory Authority is fining Morgan Stanley & Co. LLC (MS) $2M for violations involving short sale and short interest reporting rules. The violations purportedly took place over six years. The financial firm is also accused of not putting into place a supervisory system designed in a reasonable enough manner that it could…

The Financial Industry Regulatory Authority has sanctioned First New York Securities LLC for short selling prior to participating in 14 public securities offerings. To settle, the firm, which is not denying or admitting to the charges, will pay a $400,000 fine, disgorgement of $516,000 plus interest, and is barred for six months taking part in…

The Chicago Board Options Exchange, which is the largest options exchange in the United States, has consented to pay $6 million penalty to settle Securities and Exchange Commission charges accusing it of not fulfilling its obligation to enforce trading rules and failing to stop one firm member from engaging in abusive-short selling. The exchange is…

In SEC v. Moshayedi, the Securities and Commission is suing the Chairman and CEO of computer device storage company STEC Inc. (STEC) for insider trading. Manouchehr Moshayedi allegedly traded in his company stock’s secondary offering because he had insider knowledge that there was a decline in the demand for an important product. The SEC contends…

The Securities and Exchange Commission is accusing optionsXpress, a Charles Schwab Corp. (SCHW) subsidiary, of being involved in a naked short selling scheme between 2008 and 2010. The SEC filed an administrative order against the online futures and options brokerage and clearing agency, its CEO, and a client while settling with three other company officials….

The U.S. Securities and Exchange Commission has charged Forrest Fontana with violating Rule 105 of Regulation M and illegally making more than $1 million. The rule prohibits investors from taking part in public offerings when they have shorted the same securities. Fontana, who allegedly violated the rule three times, helped investors make the unlawful profits….

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